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Sources: Severstal weighs options for Dearborn plant

Photo by COURTESY OF SEVERSTAL NORTH AMERICA
The North American operations of Russian steelmaker OAO Severstal are based in Dearborn.

OAO Severstal, the Russian steelmaker controlled by billionaire Alexey Mordashov, said it is considering "a range of strategic options" for its North American unit amid reports the business may be sold. The review could even result in a sale of its Dearborn plant, sources say.

"No decision has yet been taken as to which, if any, such (strategic options) might be pursued," the Cherepovets-based company said in a regulatory statement last week.

Severstal, whose North American operations are based in Dearborn, is assessing offers for its plants in Dearborn and Columbus, Miss., people familiar with the matter said May 10, asking not to be identified because the deliberations are private. The bidders include Pittsburgh-based U.S. Steel Corp., whose Great Lakes Works operates in Ecorse and River Rouge, and number more than two, these people said last week.

Spokeswomen from U.S. Steel and Severstal declined to comment.

The U.S. sites have total annual capacity to produce 5.2 million metric tons of steel. The Russian company has invested more than $2 billion in the assets since 2004.

CompanhiaSiderurgica Nacional has made an approach for the assets, for which Severstal may receive as much as $1.5 billion, according to a May 9 report in the Wall Street Journal. A spokesman for Sao Paulo-based CSN declined to comment.

Severstal advanced 7 percent in trading last week to $8.82 in London trading, the highest since Jan. 24.

"A deal closed at $1.5 billion would boost Severstal's market capitalization as it would mean that its American assets have a higher valuation in terms of multiples compared with the parent company," Kirill Chuyko, the Moscow-based head of equity research for BCS Financial Group, said Tuesday.

Changes in North America

Severstal North America, the Dearborn-based U.S. subsidiary of Severstal, replaced nearly all of its senior management last year in an attempt to create "profitable, sustainable growth," CEO Saikat Dey said.

Dey replaced former CEO Sergei Kuznetsov on Sept. 3, 2013, and a flurry of management changes followed. Within weeks, nearly all of it top management had been replaced, including its CFO and three vice presidents.

Dey said the changes reflect the company's shift in priorities.

The old team "was focused on building new assets, investing in Dearborn and maintaining an automotive business; doing the M&A and the divestment," he said. "That was probably the right team. Now we face a different challenge ... a change in focus."

Dey said late last year that the new direction of Severstal is focused on higher-margin, or value-added, products thanks to the investments in North America.

"We believe, we have the potential to make these assets more profitable," Dey said. "All it takes is good driving."

Severstal North America will also focus on "cash discipline" and quality, Dey said.